The succession of a CEO is one of the most important events in a corporation and unfortunately, it is often a step downward, in Microsoft’s case, there is a not a lot of room to descend.
My former company, Intel did pretty well with its first three CEOs, Bob Noyce, Gordon Moore and Andy Grove, but then the slide slowly began with Craig Barrett followed by Paul Otellini. It is too early to judge Brian Krzanich, although that will probably not stop me.
In my recent blog post, Why Corporate Boards Suck, I cover some of the reasons for this.
Microsoft was not so lucky. Steve Ballmer has proven himself to be one of the worst CEOs ever. With a weak board that he could bully, he stayed way beyond his expiration date. Bill Gates was the only one that could have stood up to him, but I guess he was afraid that he might have to come back to the company as CEO, and then the certain future failures of the company would happen on his watch. So instead, he sold most of his shares in Microsoft since Ballmer has been CEO. In fact, I expect that Ballmer will soon become the largest individual owner of Microsoft stock. Good thing for Bill, since the average return of Microsoft shares has been less than 3% a year (and negative when taking into consideration inflation and tax). On the other hand, Apple averaged 38% a year over the same period.
Alan Mulally, CEO of Ford would rather stay in Detroit
It appears that no one external to Microsoft who was worthwhile wanted the job as CEO for a good reason, Bill Gates and Steve Ballmer. John Thompson who was running the CEO Search Committee ended up appointing Satya Nadel, someone that has had very little experience outside of Microsoft to the post, when what they needed the most was an outsider without attachment. It’s like Dick Cheney who, when tasked with finding a VP candidate for George Bush ended up proposing himself, John Thompson ended up as Executive Chairman of Microsoft. Somehow Bill agreed to give up the position as Chair, but remains on the board. Ballmer will also remain on the board. The cover for Bill giving up the Chair is that he will spend a few days as week as the Technical Advisor to the new CEO. This is not good. Bill was never really technical or if he was, he was no longer technical by the time he was 30 years old. He certainly never understood networking, and I can state that from many personal interactions. Bill’s genius was in how to use Microsoft’s power to get even more power. Bill Gates was a man of vision when he started but his vision did not evolve with the times, unlike Steve Jobs. One thing is clear, Bill certainly did not understand succession planning.
It is the Enterprise Stupid(s)
My friend Bob Cringely wrote a very good post on the Microsoft transition. I agree with much of it, but disagree about Xbox. I think xbox should be spun out. Maybe Amazon would buy it which would make sense. Or maybe they can sell it to Ballmer and finally get rid of the guy. The focus of Microsoft should be on creating shareholder value not in maintaining the old Microsoft. Microsoft should focus on enterprise. It could potentially merge with IBM (for someone that was active in the computer industry in the 80s, that sure seems like a crazy idea). They should use their strong balance sheet of more than $50 billion in cash to buy up companies that can service the enterprise market. They must give up their own mobile aspirations and incorporate both the IOS and Android world providing value adds such as increased security.
John Thompson to the rescue
I don’t know Thompson, but he is clearly a clever dude. He has some real world experience. He was a Vice President of IBM where he worked in a number of senior positions over a 28 year career there. This included sales and marketing. Then he was CEO of Symantec the leading computer security company. He managed to get out of there before the company went into decline and made a lot of money. So I suspect that it will not be long before Thompson adds the tittle “Executive” to Board Chairman and starts calling the shots. Nadella will function as COO/CTO. Bill will find a way to declare victory and reduce his hours as Technical Advisor. Ballmer will get mad as hell (not a pretty picture as anyone that knows him can testify) but he will hang around until he figures out what he can do. Here is a suggestion: He can become the CEO of Yahoo!
Thompson, owns 20% of a basket ball team, The Golden State Warriors. Steve Ballmer has been trying to buy an NBA team ( Sacramento Kings) so it imaybe this is really a basketball game with Satya Nadella as the ball. By thew way, Paul Allen the co-founder of Microsoft owns the Seattle Trail Blazzers.
In full disclosure, I have never been to a Basketball game nor do I plan to ever attend one.